Archives for June 2019

The Consumer Financial Protection Bureau (CFPB or Bureau) filed its semiannual regulatory agenda on June 21, 2019. The agenda discusses the many rulemaking initiatives undergone by the Bureau recently, including the Notice of Proposed Rulemaking on debt collection (NPRM). The agenda states that the NPRM “address[es] such issues as communication practices and consumer disclosures in the debt collection market.”

The agenda continues:

This proposal builds on research and pre-rulemaking activities regarding the debt collection market, which remains a top source of complaints to the Bureau. The Bureau has also received encouragement from industry and consumer groups to engage in rulemaking to address how to apply the 40-year old Fair Debt Collection Practices Act (FDCPA) to modern collection practices.

Other rulemaking activities outlined by the Bureau in the agenda include clarification regarding amendments to the Home Mortgage Disclosure Act (HDMA), reconsideration of the Payday Rules, and forthcoming continuation on rules to implement section 1071 of the Dodd-Frank Act, which amended the Equal Credit Opportunity Act.

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insideARM Perspective

The CPFB has certainly had a busy year all-around, and the proposed debt collection rules seem to make up a good portion of it. After many years of research and preparation, the NPRM was released on May 7. The following day, Director Kathleen Kraninger hosted a debt collection Town Hall in Philadelphia, where Stephanie Eidelman, the Executive Director of the Consumer Relations Consortium and CEO of The iA Institute, spoke as a panelist.

The NPRM was officially published in the Federal Register on May 21, triggering the clock to submit comments (which are due by August 19, 2019). Consumers, consumer advocates, senators, and industry members have already begun submitting comments; fifty-seven have been submitted thus far. Many more are likely to come in the next few months as everyone digests and thoughtfully prepares their response to the 500+ page NPRM.

On June 17, 2019, the Federal Trade Commission (FTC) filed a lawsuit against Grand Teton Professionals, LLC, a credit repair organization, and other corporate defendants.

The FTC alleges that Grand Teton Professionals charged illegal upfront fees for credit repair services. It also alleges that the organization threatened legal action against consumers who complained about the lack of results or the illegal upfront fees. The FTC adds in its press release:

The defendants offered consumers the option of financing these substantial fees, but failed to make critical required disclosures. When the defendants processed fees, they routinely engaged in electronic fund transfers from consumers’ bank accounts without obtaining proper authorization. The defendants often used illegal remotely created checks to pay for the credit repair services they offered through telemarketing, according the FTC’s complaint.

The judge granted a temporary restraining order against that ceased defendants’ operations and froze their assets.

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MELBOURNE, Australia — Phillips & Cohen Associates, Ltd. (PCA), the international deceased account management specialist, servicing creditors in the US, Australia, New Zealand, UK, Ireland, Canada, Spain, Portugal and Germany, is delighted to announce the launch of a major upgrade to its unique ESTATE-SERVE℠ digital solution.    

ESTATE-SERVE℠, powered by Katabat, is a proprietary global solution used by PCA to provide digital account resolution and channel choice flexibility to those handling the final affairs of a loved one.  The platform has been in place across the group for several years, but Australia is the first to launch the significantly enhanced, version 2.0 of the system.

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ESTATE-SERVE℠ includes options for Estate Managers or Executors to make payments or negotiate online, interact via a variety of contact channels, as well as provide PCA with account specific information relevant to the Estate process in a completely secure and compliant manner, available 24/7.

Discussing the launch, Adam S. Cohen, Co-Chairman/CEO, said, “ESTATE-SERVE℠ and continuously improving our digital offering to customers has always been a key part of our business strategy. It is exciting to see our Australian office continue to be at the vanguard of evolving our service offerings, and we look forward to extending this exciting investment across our global group.”   

Don Coulthard, Managing Director of Phillips & Cohen Associates (Australia) Pty Ltd., commented, “We are delighted to be able to offer improved channel choice and functionality to our customers across Australia & New Zealand. The ability to self-serve and flexibility of contact methods are the modern expectation, and the ESTATE-SERVE℠ platform perfectly complements our highly skilled Estate Care telephony team based here in Melbourne.

Whether customers choose to interact with us through online or traditional methods, they can be sure of the same secure, compassionate, and compliant service.”

About Phillips & Cohen Associates, Ltd.

Phillips & Cohen Associates, Ltd. is a specialty receivable management company providing customized services to creditors in a variety of unique market segments.  Phillips & Cohen Associates, Ltd is domestically headquartered in Wilmington, DE, with additional offices in Colorado and Florida as well as international offices in the UK, Canada, Australia, and Spain.  For more information about Phillips & Cohen Associates, visit www.phillips-cohen.com.

PCA provides Equal Employment Opportunity for all individuals regardless of race, color, religion, gender, age, national origin, disability, marital status, sexual orientation, veteran status, genetic information and any other basis protected by federal, state or local laws.

A court decision popped up in the Eastern District of New York yesterday that outlines the intricacies—and, quite frankly, inefficiencies—of certain civil litigation procedures. Watson v. Midland Credit Mgmt., Inc., No. 2:18-cv-2400 (E.D.N.Y. June 19, 2019) deals with Avila safe harbor language, or the lack thereof, in collection letters.

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Midland Credit Management (Midland) sent an almost-identical collection letter to a group of plaintiffs. The letter listed a current balance and three discounted payment options, but no interest disclosure language since the accounts were not accruing interest. The first two discounted payment options provided specific dollar amounts and due dates to settle the account, but the third offered an option to set up monthly payments “as low as” a certain dollar amount.

Plaintiffs sued, and Midland filed a motion to dismiss.

The court denied the motion to dismiss for a technically-correct (but practically-inefficient) legal nuance: since the complaint alleged that interest was accruing, then for a motion to dismiss, the court needs to take this fact as true. If interest was indeed accruing, then the third payment option—monthly payments “as low as” a certain dollar amount without a due date—does not satisfy the second prong of Avila, which requires a clear statement of an exact amount to be paid by a precise date.

However, the court noted:

[I]f, in fact, as Defendant claims, interest and other fees are no longer accruing on Plaintiffs’ debts, then, under Taylor, the letters would not be misleading. See 886 F.3d at 215 (holding that failure to disclose that a debt is no longer accruing interest or other fees is not a Section 1692e violation). However, this cannot be addressed on a Rule 12(b)(6) motion.

insideARM Perspective

Two things stand out about this case.

First and foremost: interest was not accruing on the account. This was brought up in Midland’s motion to dismiss. Per Taylor v. Financial Recovery Services, Inc. and other cases that have come after it, it means there is no violation. We know that the ultimate result here will be dismissal or summary judgment in favor of defendant. (And if not, could you imagine the Second Circuit’s exasperation on having to hear this issue again? It seems that the litigation wheels keep spinning on an issue that has already been thoroughly litigated in New York.

Second: from a reasonable reading, even if interest was accruing on the account, the letter complies with the second prong of Avila. It lists two payment options that tell the consumer exactly what to pay and by what date to satisfy the account, which satisfied Avila according to other judges in the Eastern District of New York. Avila doesn’t require that every payment option needs to be this exact.

It’s exhausting.

Want an easy way to keep up with and search relevant industry case law? Check out iA’s Case Law Tracker!

[Editor’s Note: iA Perspective updated at 1:11 PM Eastern.]

BUFFALO, N.Y. — Northwood Asset Management Group announces a donation to Stop Abuse in support of their efforts to teach children how to recognize and prevent child sexual abuse.

“Our donation is grounded in the shared belief that nothing is more important than the safety of our children,” says Andrew Fanelli, President of Northwood Asset Management Group. “While many people turn away from this sensitive subject, we embrace it with the belief that we can do something to prevent it. It is our collective responsibility to ensure the safety of our kids and help to end child sexual abuse.”

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Reports indicate that approximately 10% of child victims actually report sexual abuse and 93% of victims know their abuser. Stop Abuse is a non-profit organization that provides essential safety information regarding child sexual abuse. Using a green marionette named Simon, Stop Abuse created a four-part comprehensive program called “Simon Says Just Say.” Simon teaches children about sexual abuse in a gentle, non-threatening environment. Through education, detection, and referral, the program teaches children in Kindergarten through Fifth Grade strategies to protect themselves. The Stop Abuse program educates and empowers kids to speak up and speak out if they are being touched or approached in a way that makes them feel uncomfortable.

“Stop Abuse recognizes that child sexual victimization is a societal problem. With approximately 43 million survivors in the USA, child sexual abuse is a widespread health epidemic, yet it is talked about the least,” says Regina Marscheider, Director of Stop Abuse Powered by Spectrum Puppets. “The need for a solution to this ‘silent epidemic’ is great and we are thankful for Northwood Asset Management Group’s donation which will help us spread awareness and advocacy to prevent the silent suffering of our children.”

Stop Abuse brings awareness and attention to this epidemic and makes a direct impact on the lives of vulnerable children. For more information about Stop Abuse or to make a donation, visit stopabuse.com.

About Stop Abuse

Formed in 1986, Stop Abuse works to prevent child sexual abuse through education, detection, and referral. The organization raises public awareness through media engagements, community events, informal campaigns, educational programs, and legislative action.

About Northwood Asset Management Group

Located in Buffalo, NY, Northwood Asset Management Group is a nationally licensed third-party debt collection company that strives to deliver professional and reliable debt recovery solutions that assist consumers and creditors with achieving a favorable resolution. The company is committed to delivering services with professionalism, respect, and complete compliance.

With the TRACED Act, S. 151, safely passed and resting with the House Committee on Energy and Commerce, a quartet of Democratic Senators have turned their legislative attention to beefing up criminal penalties for violating the TCPA. Senator Catherine Cortez Masto of Nevada, joined by co-sponsors Charles Schumer (D-NY), Amy Klobuchar (D-MN) and Margaret Hassan (D-NH), has introduced the “Deter Obnoxious, Nefarious and Outrageous Telephone (DO NOT) Call Act of 2019.” The bill, S. 1826, is now in the hands of the Senate Committee on Commerce, Science, and Transportation for consideration.

Declaring, “[i]t’s time for Congress to act and put stronger penalties on those who would initiate illegal robocall scams that defraud Americans of their money,” Senator Cortez Mastro’s proposal would add a specific “Criminal Penalties” subsection to the TCPA.

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In general, any person who willfully and knowingly violated the TCPA “shall be imprisoned” for up to one year, fined under Title 18 of the U.S. Code, or both. For individuals found to have committed an “aggravated offense,” the prison time would be up to three years, with similar prospects for a fine or both. An aggravated offense would be one (a) committed by a person previously convicted under the statute, (b) involving initiating more than 100,000 violating calls in a day, 1,000,000 in a month or 10,000,000 in a year, (c) committed in furtherance of a felony or conspiracy to commit a felony, or (d) causing loss to one or more persons aggregating USD5,000 in a year.

In addition, the bill defines a “call” to include a “message or other communication.” Call initiation includes the “act of sending, making, or transmitting a call, message, or other communication.”

Finally, to top it off, the proposal would double the USD10,000 civil forfeiture penalty for violations of the Truth in Caller ID Act, a subsection of the TCPA added in 2009. At the same time, the bill does not eliminate the current criminal fine provision for illegal caller ID spoofing, but criminal penalties for such violations would now be governed by the newly added subsection.

As both Houses of Congress held hearings and considered legislation over the last several months, there were calls for more criminal enforcement under the TCPA. The penalties envisioned under the DO NOT Call Act respond in one way to those pleas. With the TCPA bills already in line ahead of S. 1826, legislative concentration seems most likely to focus on the reconciliation of the TRACED Act with any emerging House-passed initiative. Of course, TCPAWorld will be watching DO NOT Call as well.

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Editor’s note: This article is provided through a partnership between insideARM and Squire Patton Boggs LLP, which provides a steady stream of timely, insightful and entertaining takes on TCPAWorld.com of the ever-evolving, never-a-dull-moment Telephone Consumer Protection Act. Squire Patton Boggs LLP—and all insideARM articles—are protected by copyright. All rights are reserved.  

Editor’s Note: This article was originally published on the Maurice Wutscher blog and is republished here with permission.

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The U.S. Court of Appeals for the Seventh Circuit recently affirmed a trial court’s ruling that a debtor lacked Article III standing to sue a debt collector for failing to notify her in its debt validation letter that to trigger the federal Fair Debt Collection Practices Act’s protections she had to communicate a dispute in writing because the only harm she suffered was receiving the incomplete letter.

In so ruling, the Seventh Circuit created a circuit split on this issue as in Macy v. GC Services Limited Partnership, 897 F.3d 747 (6th Cir. 2018), where the Sixth Circuit held under identical facts that the complaint alleged a concrete injury because depriving a consumer of this information put them at a greater risk of future harm.

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A copy of the opinion in Casillas v. Madison Avenue Associates, Inc. is available here. 

A debt collector sent a letter to a debtor demanding payment that largely complied with section 1692g(a) of the FDCPA, except it did not state that the debtor had to send any dispute to the debt collector in writing.

The debtor sued on behalf of herself and a putative class alleging that the letter violated the FDCPA.  As you may recall, a 1692g(a) notice must state, among other items, that a debtor has two options to verify her debt.

First, the debtor must notify the debt collector “in writing” that she disputes the debt. § 1692g(a)(4). Second, the debtor may send a “written request” to the debt collector for the name and address of the original creditor. § 1692g(a)(5).

The debtor did not allege that she sent a dispute regarding the debt or that she would do so, but claimed the letter breached her rights under the FDCPA and sought to recover $1,000 in statutory damages for herself, a statutory award for the class members, attorneys’ fees, and costs.

While the case was pending the Seventh Circuit decided Groshek v. Time Warner Cable, Inc., 865 F.3d 884 (7th Cir. 2017), which followed the Supreme Court’s Spokeo decision in holding that without anything more “a plaintiff cannot satisfy the injury‐in‐fact element of standing simply by alleging that the defendant violated a disclosure provision of a consumer protection statute.”  As such, the trial court concluded that the debtor lacked Article III standing.

This appeal followed.

Initially, the Seventh Circuit observed that to establish standing a plaintiff must allege “an injury-in-fact that is traceable to the defendant’s conduct and redressable by a favorable judicial decision.”  This case concerns the first injury-in-fact requirement which involves “an invasion of a legally protected interest which is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical.”

Although Congress enabled consumers to sue debt collectors that fail to comply with the FDCPA, 15 U.S.C. § 1692k(a), the Seventh Circuit held that this does not mean that every plaintiff has standing as even in the context of a statutory violation.  Instead, the Court held, Congress must adhere to Article III’s requirement that a plaintiff suffer “a concrete injury.”   A “bare procedural violation” like the one the debtor alleged here does not satisfy this requirement.

The Seventh Circuit acknowledged that the Sixth Circuit’s opinion in Macy, under a nearly identical fact pattern, concluded that a failure to notify plaintiffs that they had to dispute their debts in writing established a concrete injury sufficient to confer Article III standing because “[w]ithout the information about the in‐writing requirement, Plaintiffs were placed at a materially greater risk of falling victim to abusive debt collection practices.”

The Seventh Circuit disagreed with this approach because regardless of whether the omission created a risk that consumers who sought to dispute the debt may waive their statutory rights, it created no risk for the named plaintiffs who did not dispute the debt or even plan to dispute the debt.  In the Seventh Circuit’s view, the risk that the omission may harm “someone” does not confer standing.  Instead, the omission “must have risked harm to the plaintiffs.”

Next, the Seventh Circuit rejected the debtor’s argument that she sufficiently alleged a concrete injury because depriving her of the knowledge that she had to submit disputes in writing constituted an “informational injury.”  The Seventh Circuit had little trouble rejecting this argument because “the denial of information subject to public disclosure is one of the intangible harms that Congress has the power to make legally cognizable. (Emphasis in original).  A public disclosure law protects “the public’s interest in evaluating matters of concern to the political community” and denying a request for information under such a law “necessarily implicates that interest.”  The debtor did not seek and was not denied any such information.

The debtor also argued that Havens Realty Corp. v. Coleman, 455 U.S. 363 (1982), demonstrated that she suffered a concrete “informational injury” because the defendant violated a statutory requirement. Havens Realty involved a minority plaintiff that sued the defendant after it “falsely told her that an apartment complex had no vacancies.”  Although the plaintiff in Havens Realty did not intend to rent an apartment, she requested the information because she suspected that the defendant was practicing “unlawful racial steering.”  She had a concrete injury because the Fair Housing Act gave everyone “a legal right to truthful information.”  The debtor argued that the FDCPA “likewise conferred on all debtors a right to complete information about their statutory rights.”

The Seventh Circuit disagreed because the Havens Realty plaintiff did not allege harm based on any received “inaccurate or incomplete information.”  Instead, she claimed the defendant harmed her by lying to her because of her race.  This invasion is precisely the “interest that the Fair Housing Act protects: freedom from racial discrimination in the pursuit of housing.”  That is not the harm the debtor claimed nor the harm that the FDCPA protects against.

Thus, the Seventh Circuit affirmed the trial court’s ruling.

Earlier this month, insideARM wrote about a data breach that occurred at American Medical Collection Agency (AMCA), a healthcare debt collection agency, when its web payment page was compromised. Yesterday, AMCA filed for Chapter 11 bankruptcy (using its business name of Retrieval-Masters Creditors Bureau, Inc.).

Editor’s Note: Chapter 11 bankruptcy involves the reorganization of a business’s debts so that the business can continue, compared to Chapter 7 bankruptcy, which involves liquidation of the business’s assets to pay creditors.

Russell Fuchs, AMCA’s founder and CEO, filed a declaration in support of the bankruptcy where he outlined the series of events that led to the data breach and the fall-out from the incident. Fuchs discusses the history of the agency and how, over time, demand grew for web-based interaction with patients, such as the web payment page. The data breach was the first in the company’s 40-year history. The declaration states:

[AMCA] first learned that there might be a problem when it received a series of “CPP notices” that suggested that a disproportionate number of credit cards that at some point had interacted with [AMCA]’s web portal were later associated with fraudulent charges. In response, [AMCA] shut down its web portal to prevent any further compromises of customer data, and engaged outside consultants who were able to confirm that, in fact, [AMCA]’s servers (but not [AMCA]’s residual mainframe) had been hacked as early as August, 2018. This knowledge led to the following cascade of events that ultimately has resulted in [AMCA]’s need to seek relief under [C]hapter 11 of the Bankruptcy Code in this Court.

Fuchs explains that the data breach led to a severe drop in its business. LabCorp almost immediately terminated its relationship with AMCA while Quest Diagnostics, Conduent, and CareCentrix (who, along with LabCorp, made up AMCA’s four largest clients) terminated or “substantially curtailed” their involvement with AMCA.

In all, the data breach and its fall-out caused this business, which was previously adequately capitalized, to no longer be able to bear its expenses. Thus, it moved for Chapter 11 Bankruptcy.

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insideARM Perspective

As insideARM previously mentioned, this is a sobering story. Fuchs’ declaration should be necessary reading for all executives and compliance, legal, and IT professionals in our industry. It outlines in detail how the demand for innovation led to the worst case scenario and resulted in a compromise of consumer data, the loss of a business’s major clients, and employee layoffs. With the sensitive nature of consumer data held by collection agencies, the balancing act between innovation and security is vital.

As a recent article reported, another court in the Northern District of Illinois found that random and sequential number generation is required to state an ATDS claim, restoring balance to the universe after Espejo. Well now we are happy to report that the Eastern District of North Carolina has entered the fray and held on Friday that the TCPA’s ATDS definition requires random or sequential number generation, no matter what Marks says.

In Snow v. General Electric,  No. 5:18-CV-511-FL, 2019 U.S. Dist. LEXIS 99760 (E.D.N.C. June 14, 2019) the Court dismissed a complaint—with prejudice—where the texts at issue were targeted and non-random. As the Court put it: “Critically missing from the complaint are any facts permitting an inference that the text messages plaintiff received were sent using equipment that stores or produces numbers to be called “using a random or sequential number generator.”

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In reaching this conclusion the Court rejected any application of the FCC’s 2003 and 2008 Predictive Dialer rulings noting that the Circuit Courts of Appeal have “uniformly” held that ACA International “set aside the FCC’s interpretations of the definition of an ATDS, and that the court must return to interpreting the statutory definition of ATDS without that FCC guidance.”  The Court goes on to directly reject Marks in favor of the approach adopted in Dominguez: “The statute unambiguously incorporates a ‘random or sequential number generator’ into the definition of an ATDS… [t]hus, plaintiff must allege facts permitting an inference that defendants called her with equipment that has the capacity to store or produce numbers using a random or sequential number generator.”

So there you have it—yet another tally mark finding the 2003 and 2008 FCC Orders were set aside by ACA Int’l and that random or sequential number generation is now required. Notably, Snow is the first case addressing the ATDS definition in North Carolina and appears to be the first case in the entirety of the Fourth Circuit to do so. Defendants in ACC country certainly needed some good news after the Fourth Circuit Court of Appeals applauded TCPA class actions a few weeks ago. It remains to be seen whether other district courts follow Snow or opt for other approaches. More to come.

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Editor’s note: This article is provided through a partnership between insideARM and Squire Patton Boggs LLP, which provides a steady stream of timely, insightful and entertaining takes on TCPAWorld.com of the ever-evolving, never-a-dull-moment Telephone Consumer Protection Act. Squire Patton Boggs LLP—and all insideARM articles—are protected by copyright. All rights are reserved.

MINNEAPOLIS, Minn. — DCM Services, LLC (DCMS) the industry leader in estate and specialty account recovery solutions, announced today the promotion of Dereck Eastman to Chief Technology Officer.

Eastman, who most recently served as Vice President of Information Technology, will continue to oversee all application and development support as well as the IT infrastructure area. Eastman joined the organization in 2006 and has nearly 2 decades of experience architecting and developing software. He has been the premier software developer at DCMS and has led the development of several technologies including Probate Finder®, Probate Finder OnDemand®, DCMS ServiceLink® and many other industry-leading tools.

“Over the last 13 years, Dereck has become an integral part of our organization,” said Tim Bauer, DCMS Chief Executive Officer. “Dereck’s ability to understand business challenges and apply appropriate technology solutions has established him as a leader within DCMS. Dereck’s leadership and accomplishments at DCMS have led to this well-deserved promotion.”

Stay ahead of industry trends, follow DCM Services on LinkedIn.

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About DCM Services

Minneapolis-based DCM Services, is the industry leader in estate and specialty account resolution services, maximizing the value of client portfolios across financial services, healthcare, retail, and telecom industries through innovation and performance. Its recovery solutions offer a full range of services from proprietary web-based solutions to full outsourcing, maintaining an unmatched spectrum of innovative solutions that increase recoveries, protect brand value, and enhance survivor relationships – with respect and sensitivity. For more information on all DCM Services’ offerings, visit www.dcmservices.com.